Back in 1982, when he and three compatriots first started the now-megacorporation Sun Micro-systems Inc., Scott McNealy, then 27, borrowed $15,000 in start-up capital from his father. Originally in charge of manufacturing for the budding business, McNealy didn't know a thing about high-tech.

A lot has changed since then. These days, McNealy is easily recognized as a visionary in the high-tech industry, and Sun Microsystems has earned a reputation as a leading provider of heavy-duty, technologically sophisticated computers known as workstations (used by, for example, engineers in sophisticated design work) and servers that use the UNIX operating system, generally considered more reliable than Microsoft's own Operating system. Sun is also the market leader in setting up systems for Internet companies.

With the U.S. Department of Justice's recent antitrust lawsuit against Microsoft, McNealy, Sun's Chairman and CEO, was recently catapulted into living rooms nationwide as the most outspoken leader of a loose coalition of companies (including AOL) that provide alternatives to the Microsoft way of computing. McNealy has long promoted a concept that is just now catching on, thanks to the growth of the Internet: "The network is the computer." Instead of the usual complex PC with all the processing power and applications it might ever need on its hard drive, individuals could rent applications on demand over the Net and leave the challenge of system maintenance to the provider, who would have the best technical expertise.

We caught up with McNealy recently and asked for his thoughts on Microsoft, his company's secrets to success and the future of computing.

Scott S. Smith writes about business issues for a variety of publications and Web sites including Retail Pharmacy News and Office.com.

Sun Values

Scott S. Smith:You're probably best-known to the general public for your attacks on Microsoft. What do you think Gates and his company are doing wrong?

Scott McNealy: I poke fun at Microsoft, but I don't dislike them. We do have some philosophical differences. They finally woke up to the importance of the Internet, which is good, but they're still mired in a closed, proprietary mindset [by making products that work best with other Microsoft products]. That's not what the Internet is all about.

Since about 1996, Sun has been talking about connecting anyone, anywhere, at any time, on any device. Last year, Microsoft adopted that as their official mission statement. I like the fact that they're following our lead; I just wish they'd do a better job of it. Their idea of choice is a bit like Henry Ford's. Ford said you could have a Model T in any color you wanted, as long as it was black.

Smith:What unique technologies does Sun offer and how do you see them fitting into changes in computing in the next three years?

McNealy: Sun is the most open computer company I can think of. We've always published our programming interfaces so anyone could make compatible products, and now we're taking that openness a step further by making the source code [which is generally not fully revealed to outside software-application designers] freely available as well. Let's face it: The dotcom world runs on open technologies. There's no other way to do it; no other way that makes sense.

The Changing Operating Systems

Smith:How does this relate to the increasingly popular Linux operating system?

McNealy: Linux has the right idea as far as being open and encouraging participation. The drawback with [fully] open source is, there's no clear control over compatibility issues. [Sun allows input into changes by outside programmers, but makes the final decisions.] We've tried to take an approach that combines the best aspects of the open-source model with the best aspects of traditional licensing-namely, ensuring compatibility. That's just absolutely crucial in a networked world. Also, every time someone uses Linux, they're not using Windows, they're using something much more UNIX-like, much more akin to our own Solaris environment.

Smith:But what about all the PCs and Macs everyone already has? Even though everyone hates the buggy software and the frequent crashes, it's part of a system that can't just be jettisoned. It all has to be serv-iced, and it's hard to find competent people to do that. If you were an entrepreneur, how would you address these challenges?

McNealy: In a word, outsource. If you're a florist, a baker, a travel agent or whatever, technology is not your strong suit-and it shouldn't have to be. That's why Sun has been so focused on the service-provider model, providing the kind of reliable, scalable infrastructure that service providers need to be successful-and make you successful.

My advice is to focus on what you do best, and let your service provider worry about the technical stuff. After all, when was the last time your electric company asked you to noodle with its power plant?

Smith:How might the changes you foresee in computing impact education? We ask not just out of interest in the quality of education for our children, but because this seems to be a hot growth area for business for the next decades.

McNealy: Right. Just look at what's happening in the dotcom world, with all kinds of companies reinventing themselves. It quickly becomes clear that the business of education will also change. It will have to. Colleges and universities can't afford to think of students in the same old ways. They're not all 18- to 20-something any longer. More and more are adults with jobs and children. They're people who need to keep learning to keep up with changing times, to ensure their professional growth or transition into new careers.

Look at it this way: One day, every man, woman and child will be connected to a high-speed network at all times. That's a huge market. Anyone who can come up with a compelling online curriculum stands to do well.

Sun Management

Smith:Sun has grown enormously since you helped start it. How have you been able to adapt when most entrepreneurs can't make the transition to a big corporation?

McNealy: My advice is to surround yourself with people who're smarter than you are. First of all, that's the only way you're going to learn anything. It's also the only way you're going to feel comfortable entrusting someone else to make important decisions for you. As Sun started growing, I quickly learned that I couldn't do everything, and as it has continued to grow, I've given more and more responsibility to the people around me. That allows me to focus on what I really have to do. Also, others are doing things I never would have thought of.

One of the biggest weaknesses of executives is that too many overthink things. The best decision is the right decision. The next best is the wrong decision. The worst decision is no decision.

Smith:Does Sun have any management practices that distinguish it from other companies?

McNealy: We've found that the best way to ensure a bright future is to change strategies in the middle of our successes. It's all about preparing for market shifts before the competition does. As Wayne Gretzky used to say, "You have to look where the puck is going, not where it is."

Smith:But a lot of firms fear that their best talent will all go off to work at Web start-ups. How do you keep that from happening?

McNealy: Attracting and retaining top talent is a big issue right now. Always has been, really. But especially now, since opportunities in the technology sector are expanding more rapidly than the pool of available talent. Incentives are important. Cash compensation, benefits, stock options-the good, old-fashioned profit motive. But so is creating the right work environment. At Sun, I tell managers that they work for their employees, not the other way around. I want our employees to be challenged, inspired and supported. They're our most important resource. We can't be successful without them.

Smith:You obviously are especially dependent on sales reps. What do you look for in hiring them?

McNealy: I've been out with our team on thousands of sales calls, and I'd say the most important qualities are character and integrity, because you can always learn sales skills. These are the people who represent your company, who interact with your customers. To a very large extent, your viability rests in the hands of your sales force. They also have to understand your customers as well as they understand your products.

McNealy's Career

Smith:You give a lot of speeches to employees, investors, business partners and so forth, yet you've said you had a hard time doing this in the beginning. What have you learned making good presentations?

McNealy: I was scared to death the first time I spoke to the board, before I became chairman. And I was terrible. Fortunately, someone took me aside and said, "Scott, we want to get you into a speaker-training program." It must have done some good-I don't see nearly as many glazed eyes now as I did that day. I wasn't a natural, so anyone can do it.

Smith:What have been your biggest career mistakes?

McNealy: I've made plenty of mistakes-none I care to tell you about!-but that's to be expected. If you're not making mistakes, you're not trying hard enough. You're not stretching yourself. What did I learn from them? Not to make them again!

Smith:Well then, what's been the biggest positive surprise?

McNealy: Everything, literally. I feel very lucky to be where I am today, and I'm very proud of the impact Sun has had on the industry. We started Sun back in 1982 with the idea that computers should be networked-that they should be able to talk to each other no matter who made them. Pretty wide-eyed, idealistic stuff, I know. But we've come a long way toward making that vision a reality. That's a big positive, and, I think, a big surprise to a lot of people. When we started saying, "The network is the computer," people looked at us like we were nuts. Now everybody gets it.

Smith:Do you have any heroes in the business world, and, if so, what have you learned from them?

McNealy: I'd have to say Jack Welch, chairman of General Electric. We happen to share a passion for golf, so that's given me a chance to learn from a true master. Just to be clear, that's not a reference to golf, even though he's beaten me the last couple times we played! I'm talking about what he's done with GE. He keeps reinventing the company-and he does it with a focus on hiring and promoting bright people.

Smith:We asked Bill Gates this sort of question, and we'd like to get your response: If you were to leave Sun, what would be another field you might go into that looks exciting?

McNealy: To tell you the truth, I've never really thought about it. I'm happy right where I am.